Eight Questions about Solar Power in Arizona

Prepared by Martin J. (Mike) Pasqualetti, Ph.D.
Chair, Arizona Solar Energy Advisory Council
Board Member, Arizona Solar Center

1.  How do we get over the cost hurdle?

2.  What about the storage problem?

3.  What are the most promising ways of getting solar revved up in Arizona ?

4.  Which uses of solar power are most promising?

5.  Why are some other countries making so much greater use of solar power?

6.  Some people say that solar power is actually less efficient in the Valley of the Sun because sunshine here is offset by the heat here. Is that true?

7.  What recent technology strides to know about? What's on the horizon?

8.  What are some outstanding success stories?

1. On Costs

The so-called “cost-barrier” to PVs is overstated.  Costs are not a barrier to large systems, remote systems, systems where competing costs are high (e.g. Japan), or when environmental costs are given any consideration at all.  The coming conditions as of January 1 should wipe out most of this worry, even among skeptical homeowners.    

• Many in the solar community would (if predictably) say “What cost hurdle?”  And they have a point.  Japan has removed all incentives as of Jan. 06 and the orders are still very strong.  Of course, electricity prices are not subsidized as they are here, so they tend to be higher. 

•  Solar is now cheaper than conventional electricity in most of the rest of the world.   Electricity like oil is subsidized in the US . Japan ’s retail electric rate is $0.25 / kWh (about 3 times Arizona ’s average rate)

• Many recent studies have pegged the per kWh cost at below $0.10/kWh.  The recent spot market cost for PVNGS is over $0.10/kWh.  It is widely known that the estimated cost per kWh is thought to be 6-8 cents per kWh for large-scale systems in the 100 MW range.

• Tucson Electric Power generates currently at 9.9 cents/kWh, albeit their system is adjacent to their existing coal-burning Springerville power plant, obviating the need for the usual infrastructural costs (transmission, land, etc.).  Their site might be a ideal site for additional large-scale centralized installations.

• Many of my solar friends would (albeit predictably) say “What cost hurdle?”  And they have a point.  Japan has removed all incentives as of Jan. 06 and the orders are still very strong.  Of course, electricity prices are not subsidized as they are here, so they tend to be higher.  A 30% Fed tax credit will, as I mentioned yesterday, make PV competitive in 2006 in the US . 

• Stirling Energy Systems (SES) of Phoenix , which uses a dish-like concentrator  arrangement, recently signed a power purchase agreement with So California Edison and San Diego Gas and Electric.

• “The new federal energy bill also includes an important component for the current discussion. Beginning in 2006, residential solar systems are eligible for a 30% tax credit to a maximum of a $2,000 credit.^[1]   The tax credit is allowable on the installation price less the state tax credit. So in this case, the allowable credit is $1,800 based on the $6,000 net after the state tax credit ($7,000 – 1,000 = $6,000 X .30 = $1,800).” Out of pocket expense is $700 for a one kW system (most people around here have been installing 2-3 kW)  (n.b. This paragraph and the table below come from: Dean Howard Smith and Gary Tallman’s new study Investing in Your Future: With Current Arizona Policy, a Solar Panel is a Good Investment.  Northern Arizona University .

 Table 1: Net cost of a 1kW system

• It should also be said that the use of PV is an economic choice right now for off-grid and remote locations, including many Indian reservations.   If one were to give any value at all to the environmental benefits of using solar, there would be no question that it was economic. The economic argument may well be the most compelling, as solar emits no greenhouse gases after manufacture and a infinitesimal amount when compared to coal.

 2. On Storage

• Obviously, the sun goes down, but the problem is not insurmountable for several reasons as several Arizona users have demonstrated.  Moreover, PVs will provide their electricity just about when we need it in our homes, off-setting some traditional generation without additional power plant construction.  Any time they are not producing enough to meet demand, the normal grid-tied system can take over.  If the solar arrays are large and constructed near an existing power plant (coal, hydro) they can firm up the solar. 

• Local solar firms have been putting in PV systems for the last 30 years with 5 sunless days of battery storage.  The batteries cost $1 per pound, last 6 or 7 years and are 100% recycled. This is less than a pound of food that only lasts one meal.

• Not a problem for grid-tied systems until we get into the hundreds or maybe 1000s of Megawatts.  One option is to site solar at existing generating facilities, like a gas-fired or coal-fired power plant.  If the solar backs off due to weather or storms, the fossil-fueled portion of the plant can ramp up to keep the power output steady.  This is a variation on the hydro-dam idea I mentioned last night. There are merchant gas plants considering this right now – and it’s not a bad deal considering wholesale gas plants are selling power to the grid at $100 / MWH ($0.10 / kWh).

 3. On Getting Solar Revved up in Arizona

• Invite and encourage a large-scale development of solar here (of several hundred megawatts).  Several companies have been sniffing around to do just that, although they have been thwarted (they say) by the local utility companies.

• Establish ambitious goals.  The Western Governor’s Association, has a target of 30,000 MW of renewable for the western states by the year 2015.  See http://www.westgov.org/ for details. 

• Increase the Environmental Portfolio Standard, a function of the Arizona Corporation Commission.

• Get real teeth in a law mitigating CC&R restrictions on homeowners.  There is existing law that protects homeowners in Arizona , but CC&Rs tend to scare possible users

• Get major developers to design homes for easy installation of PV systems.  They build some 90% of all new homes. Most designs make it more difficult to install solar than it need be.

• Have the utilities pay a closer to a real price for on-peak PV power.

• Establish tradable Green Credits (tags) in favor of PV that are valued closer to the equivalent pollution that they avoid.

4. Which Uses are Most Promising

To many, PVs lead the way because costs are dropping rapidly, supplies are increasing, emissions are non existent, there are few if any moving parts, maintenance in small, transmission lines can be minimal or even absent.  Passive solar design is even better; that is, design our buildings so that we don’t need as much electricity in the first place. 

5. Success Stories in Other Countries

In Germany solar development owes much of its success to their so-called feed-in law.  Here’s a web site that concisely describes how it works: http://www.solarbuzz.com/FastFactsGermany.htm.

Here are the basics

• The "Feed-in Law" in Germany permits customers to receive preferential tariffs for solar generated electricity depending on the nature and size of the installation. Under the new tariff structure introduced in 2004, the base level of compensation for ground-mounted systems can be up to 45.7 euro cents/kWh. PV installations on buildings receive higher rates of up to 57.4 euro cents/kWh.

• The Feed-in Law fixes tariffs for approved renewable energy projects for a 20-year period from the plant commissioning and will apply incremental price cuts. Tariffs were initially set at 48.1 cents per kilowatt hour for solar energy, 8.6 cents per kWh for wind, from 9.6 to 8.2 cents per kWh for biomass, 8.4 to 6.7 cents per kWh for geothermal and 7.2 to 6.3 cents per kWh for hydropower, waste and sewage gas.

• Some German states have subsidy programs for PV installations that can be used in combination with the national Feed-in Law.

In other words, the German government subsidizes solar power in order to help it get a firm footing.  They do the same, as it says above, for other renewables, but at a reduced rate. 

In Japan , the competing cost of conventional electricity is so much higher that it goes a long way to make solar an economically sensible choice.

 6.  Does heat offset efficiency?

• Technically, this is true, but what they have told you is misleading; the slight reduction is overwhelming offset by the quality (consistency and abundance) of our resource here.

• We in the Valley of the Sun get 70% more power from the same PV than they do in Germany (The world's biggest market).

• In Flagstaff , we get 83% more power than Germany does, due to the elevation and less atmospheric absorption, with the lower temperature contributes a slight increase in efficiency. 

• They might be referring to the aging that the heat does to inverters (that change DC into AC), but it is not considered significant enough to deter solar deployment. 

• By the way, their claim is not true at all for solar thermal systems.

7.  Needed technological strides

• Technological strides are not necessary.  PV is at least 35 times more efficient than biomass in converting solar energy to electricity today.  Improvements are being made as the industry expands at a very rapid rate.  We were growing at a compounded rate of about 35% per year until 2004 when we hit a 65% growth rate which should be matched this year and for the next 5 years. 

• What we need is volume production - The industry has not and is not expecting "breakthroughs." The technology has been known for over twenty years.

• That said, improvements do continue.  Check out SunPower (www.sunpowercorp.com). They have the most efficient PV modules on the market and the aesthetics of their 200 watt module are unmatched by any competitor.  They could dominate the US market in the next 2-4 years.

 8. Success Stories

• Many remote homes and ranches have worked without problems for 25 and 30 years.

• City of Tucson’s 60 kW photovoltaic array at the new Pennington St. Garage (top deck has a 30+ space canopy that uses PV modules to shade the cars parked on this level)

• Imperial National Wildlife Refuge near Martinez Lake , AZ.  Good example of a Refuge Manager taking control of his energy situation and prominently displaying solar for public viewing.

• Rate hikes for conventional power are a sign of things to come.  Every cost hike for traditional energy makes solar energy just that much better of an investment. 

• SES’ power purchase agreement with SCE is for 800-1,750 MW of solar (the world's largest solar plants, by far).  Though it is in California , the company has its headquarters in Phoenix . These solar plants will be dish Stirling based power plants, one for SCE, the other for SDG&E.